Three United States law firms have launched investigations into HDFC Bank over alleged securities law violations, focusing on whether the bank disguised payments to the Maharashtra State Road Development Corporation (MSRDC) as marketing expenses.

HDFC Bank shares have declined significantly following the announcements of these investigations and the bank's Q1 earnings report. The investigations stem from a report alleging that HDFC Bank made payments to Maharashtra's road development corporation in order to attract large deposits from the state agency.

The US law firms are examining whether these payments were improperly classified and whether they violated federal securities laws. HDFC Bank's American Depositary Receipts (ADRs) trade on the New York Stock Exchange, which places the bank within the jurisdiction of US securities regulators and exposes it to potential shareholder litigation from US-based investors. The firms are seeking shareholders who suffered losses to come forward as the investigations continue. Such investigations are typically preliminary steps that may or may not lead to formal class-action lawsuits and do not by themselves indicate that any violation has occurred.

HDFC Bank has strongly denied any allegations of wrongdoing or culpability.

The investigations add to the pressure on India's largest private sector bank, whose shares have also been affected by its recent Q1 earnings report. According to a related Economic Times report, the probe centers on the nature of the payments made to MSRDC and whether they were disclosed accurately to investors.

Source: Economic Times Markets